It is beyond the scope of this pamphlet to comprehensively discuss all tax-saving techniques. However, your attorney or accountant possesses multiple tools and techniques at his or her disposal, which may be utilized to avoid excessive taxation.
For married persons, it is generally advantageous, regardless of who dies first, to take advantage of the $675,000 tax-free amount ($1 million beginning in 2002) of which each may pass, tax-free. Leaving all of the estate to the surviving spouse will subject all of it to the highest tax rates upon his or her subsequent death.
For example, in 2001, on a combined estate of $1.35 million, equally owned by spouses, good planning can result in zero dollars of federal estate tax being paid, a savings of $325,000 over the result if all property is simply left outright to the surviving spouse. Good planning and this illustration might utilize, for example, two revocable trusts for husband and wife, a "Q-TIP" trust and a "Family Support" trust. These are but two of the many options available to the estate planner. Other commonly utilized estate planning techniques include: Living Trusts, Irrevocable Life Insurance Trusts, Gifts Charitable Trusts, Private Annuities, Grantor Retained Income Trust, Crummey Trusts and Family Limited Liability Companies.
Estate Planning is a highly complicated subject which should be attempted by you only in consultation with your attorney. Prior to consulting with your estate planning attorney, you should locate and organize a current financial statement, income tax returns for three immediate prior years, gift tax returns, divorce decrees, business agreements, partnership agreements, and any existing wills and trusts. This and additional information will be necessary for your estate planner to efficiently plan for accommodating your dispositive wishes as well as maximizing tax savings.
There are multiple complex technical rules regarding the execution of wills and trusts. The lay person who attempts to draft an estate plan does so at his or her peril.